Fed Finalizes SIFI Risk Rating System

The Federal Reserve today finalized a new supervisory rating scale for large bank holding companies to better harmonize the ratings system with its existing supervisory program. The rating scale applies to large bank holding companies with more than $100 billion in total assets, as well as intermediate holding companies of foreign banking organizations with more than $50 billion in assets and takes effect Feb. 1, 2019.

The new scale assigns ratings for capital planning, liquidity risk management and governance and controls. Banks will be assigned ratings in each category, rather than receiving a standalone composite rating, and each category must be highly rated for the bank holding company to be considered “well-managed.”

The Fed noted that it would use a multi-level review and rely “to the fullest extent possible” on other regulators’ assessments when determining ratings. In response to comments from the American Bankers Association, the agency said it would consider the extent to which compliance matters materially affect a firm’s financial and operational strength and resiliency when assigning a rating. It also eliminated the 18-month standard for addressing deficiencies prior to a rating downgrade and removed vague references such as “strong” risk management and controls in favor of an “effective” standard, which ABA also called for in its comment letter.


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